Analysing the Telstra buy-back: Part 1 (Super funds)

Key Points Benefit of franking credits can be shared amongst different classes of shareholder Telstra buy-back attractive to pension mode super funds who wish to sell For accumulation funds, depends on the final price and the value they place on capital losses On 14 August we purchased 1,200 shares in Telstra (ASX Code: TLS) for each of our model portfolios (see franked dividend (with franking credits attached). This is attractive to shareholders like super funds (which have low rates of tax and can have franking credits refunded) but less so to individuals on higher tax rates (who are taxed...

On 14 August we purchased 1,200 shares in Telstra (ASX Code: TLS) for each of our model portfolios (see franked dividend (with franking credits attached). This is attractive to shareholders like super funds (which have low rates of tax and can have franking credits refunded) but less so to individuals on higher tax rates (who are taxed more heavily on dividends than capital gains) and non-residents that can’t claim franking credits.

But there’s the inevitable catch: the value of the credits is shared with non-participating shareholders through the off-market buy-back occurring at a discount to the prevailing market price.

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